September 30, 2023

The cost of buying a brand-new car has increased over 14 percent in the past year, as per a report by a reputable automotive research firm, which claimed that the record-breaking price increase was mainly due to supply issues and the demand for luxury vehicles.

“New-vehicle average transaction prices (ATPs) increased further into record territory in December 2021 to reach $47,077,” according to the Kelley Blue Book study released on Tuesday. The price increased by $5,724 in December 2020 and recorded a monthly increase of 1.7 percent, which is $808.

Despite the high consumer demand, the availability of new vehicles was limited, and dealers were forced to give up discounts or, in certain instances, increase prices over the manufacturer’s suggested retail price (MSRP).

In the wake of the lockdowns caused by pandemics that impacted the economy, many people stayed home as they slowed their travel and relied more on smartphones and computers. Automakers halted production due to lower demand and followed the government shutdowns to stop the spread of disease.

Chip makers shifted their emphasis away from automobiles and towards consumer electronics. While the loosening of restrictions and the sudden economic growth re-started auto factories, they could not acquire enough chips, which led to production slowdowns, a lack of stock, and high costs. Prices for cars were among the primary reasons for the 40-year rise in the rate of inflation that plagued the nation.

In the year past, there was a total decline in sales volume, with six months of declining sales, which ended in November. However, sales increased in December, with 1,219,000,000 units sold. The average cost for a not luxurious car was $43,072 in December since buyers paid more than MSRP in the past six months.

The ATP for a luxurious car was $64,864, $1,300 more than the MSRP. Luxury car sales usually increase in the final couple of months. In December 2021, 18.4 percent of the total vehicles sold were in the luxury segment, pushing up the average cost for the year.

“December typically is the best month for luxury vehicle sales, and 2021 followed that trend in a big way,” Kayla Reynolds, analyst at Cox Automotive, said in the report. “The result was another record in overall average transaction prices, completely driven in December by the increase in luxury vehicle sales.”

As of December, the share of cars compared to other vehicles sold was at 30 percent; in 2021, it fell to 22.7 percent. Cars that cost $42,460 were lower than SUVs, priced at $55,049 for trucks or $46,908 for vans.

The cost of the Ford car was $50,698, an increase of 5.7 percent over December 2020. Mitsubishi has the most significant price increase of 33 percent, with a value of $23,576, and was followed by $79,182 Cadillacs, with a 25 percent increase.

However, Fiat and Porsche went lower in cost, 8.1 and 6.3 percent, respectively, between $27,467 and $98,357. Porsche was the most expensive in the average price of all brands in the study.

Incentives for automobiles decreased to a record-low 3.9 percent in March.

Naveen Athrappully is a reporter who reports on world and business news at The Epoch Times.

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